When does online selling become a business?

If you sell unwanted personal items occasionally, whether through an internet auction site or online classified advertisements you will not be treated as trading for tax purposes (although you might need to pay CGT if the gain is considerable). However, if your selling activities are more regular than this, you may be classified as ‘in business’ and therefore liable to tax. 

HMRC are now able to track online sales on sites such as Etsy, Ebay, PayPal and Gumtree so it is worthwhile to ascertain whether your actives are subject to taxes by asking the following:

• Am I intending to make a profit?
• Am I carrying out systematic and repeated transactions?
• Do my transactions have short intervals between them?
• Did I purchase good to sell on? (those received as a gift or as inheritance and those which provided ‘pride of possession’ throughout ownership are less likely to be subject to tax)
• Were the goods repaired, modified or improved to sell more easily?
• Were the goods sold in a way that emulates an existing business?
• Was money borrowed to buy the goods?
• Were any profits to be used to repay the loan I used to buy them? 

If the answer is yes to any of the above (and your income exceeds the personal tax-free allowance), HMRC may see the activity as a commercial venture and you must then declare any profits within a self-assessment tax return. If your taxable turnover exceeds the VAT threshold, you must also register for VAT and make VAT returns.